1) Closing entries are necessary for temporary accounts only a. permanent accounts only b. temporary accounts only C. both permanent and temporary accounts. permanent or real accounts only 2) Each of the following accounts is closed to Income Summary exeept Selected Answer: b. Dividends a. Expenses . Dividends , Revenues. d. All of these are closed to Income Summary. 3) The heading for a post-closing trial balance has a date line that is similar to the one found on Selected Answer: a. a balance sheet ‘balance sheet b.an income statement ¢, aretained earnings statement. 4. the worksheet, 4) The final step in the accounting eyele isto prepare Selecied Answer: d. adjusting entries, 2. closing entries. b. financial statements ¢. a post-closing tial balane. 4. adjusting entries 5) Income Summary has a eredit balance after revem closing entry for Income Summary will include a Selected Answer: e. eredit to Retained Earnings. nswers: a, debit to Retained Earnings. b. debit to Dividends ¢, credit co Retained Earnings 4, credit to Dividends. sand expenses have been closed into it, the 6) The closing entry process consists of closing Selected Answer: d. all temporary accounts. Answers: a. all asset and liability accounts. b. out the retained earnings account ¢. all permanent accounts d, all temporary accounts. 7) Assuming that there is a net loss for the period, debits equal credits in all but which seetion of the worksheet? Selected Answer: a, Income statement columns a, Income statement columns b. Adjustments columns ¢, Trial balance columns d, Adjusted trial balance columns‘The income statement for the month of June, 2011 of Ramirez Enterprises contains the following informati Revenues$7,000 Expenses: Wages ExpenseS2,000 RentExpense,000 Supplies Expense300 ‘Advertising Expense200 InsuranceExpense 100 Total expenses 3,600 Net income $3,400, 8) The entry to close the expense accounts includes a Selected Answer: a. debit to Income Summary for $3,400. a.debit to Income Summary for $3,400. b, eredit to Rent Expense for $1,00 ¢. ered to Income Summary for $3,600. 4. debit to Wages Expense for $2,000, 9) After the revenue and expense accounts have been closed, the balance in Income Summary will be Selected Answer: c. a eredit balance of $3,400. », a debit balance of3,400. Ca credit balance of$3,400, D a credit balance of$7,000, 10) Intangible assets are Selected Answer: c, noncurrent resources. 4, listed under current assets on the balance sheet. b. not listed on the balance sheet because they do not have physical substance. ©, noncurrent resources. 4, listed as a long- term investment on the balance sheet. 11) The relati compat Selected Answer: b. liquidity. a. profitability b. liquidity c. market value, . accounting cyele. hip between current assets and current liabilities is important in evaluating @ 12) A post-closing trial balance will show Selected Answer: only balance sheet accounts. a. zero balances for all accounts. B .zero balances for balance sheet aecounts. «, only balance sheet accounts. . only income statement accounts 13) The information for preparing a trial balance on a worksheet is obtained from Selected Answer: b. general ledger accounts. a, financial statements. b. general ledger accounts. c. general journal entries. d. business documents. 14) The balance of the depreeiation expense account will appear in the income statement debit column of a worksheet. Selected Answer: True True False15) Closing revenue and expense accounts to the Income Summary aecount is an optior bookkeeping procedure. Selected Answer: False True False 16) Correcting entries are made any time an error is discovered even though it may not be at the end of an accounting period. Selected Answer: True True False 17) On Mareh 8,FernettiCompany bought office supplies on account from the Flint Company for '3880,FernettiCompany incorrectly debited Office Equipment for $800 and credited Accounts Payable for $800. The entries have been posted to the ledger. the correcting entry should be: Supplies 8800ffice Equipment 800Accounts Payable 80 a. OfficeSupplies880AccountsPayable880 b. OfficeSupplies880AccountsPayables00 €. OfficeSupplies8800fTicEquipment880 4d, OfficeSupplies8800fTice n Equipment n 800 Accounts Payablen80 18) An unacceptable way to make a correc Selected Answer: b. erase the incorrect entry. a. reverse the in correct entry b, erase the incorrect entry. c. compare the incorrect entry with the correct entry and make a correcting entry to correct the accounts d. correct it immediately upon discovery 1g entry is to 19) The Sales Returns and Allowances account and the Sales Discount account are both classified as expense accounts. Selected Answer: False True False 20) Gross profit represents the merchandising profit of a company. Selected Answer: True True False 21) Whieh of the follow nt about inventory systems? Selected Answer: b. Perpetual inventory systems require more detailed inventory a. Periodic inventory systems require more detailed inventory records. ’. Perpetual inventory systems require more detailed inventory records. ¢. A periodic system requires cost of goods sold be determined after each sale DA perpetual system determines cost of goods sold only at the end of the accounti -ecords, 22) Freight costs paid by a seller on merchandise sold to customers will cause an increase Selected Answer: b. in operating expenses for the seller. a. in the selling expense of the buyer. b. in operating expenses for the seller, c.to the cost of goods sold of the seller dito a contra-revenue account of the seller. 23) Geran Company purchased merchandise inventory with an invoice price of $8,000 and credit terms of 2/10, 0/30, What is the net cost of the goods if Geran Company pays within the discount period? Selected Answer: b. $7,840 2. $8,000 b. $7,840 ¢.$7.2004.$7,360 24) Net income from operations is gross profit less Selected Answer: b. operating expenses. Answer 4, financing expenses, . b. operating expenses. a «. other expenses and losses. 4. other expenses. 25) Sales revenue less cost of goods sold Is called Selected Answer: a. gross profit. a, gross profit, ». net profi. «net income, 4, marginal income. 26) The Sales Returns and Allowances account is classified as a(n) Selected Answer: d. contra revenue account, 8. asset account. », contra asset account. ©, expense account. d. contra revenue account, 27) Financial information is presented below: Operating Expenses $ 45,000 Sales 150,000 Cost of Goods Sold 77,000 The gross profit rate would be ‘Selected Answer: d. 487, 2.700. b..187. © 300. 4.487. § X 28) During 2011, Yoder Enterprises generated revenues of $90,000. The company’s expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000 and a loss on the sale of equipment of $3,000. Yoder’s net income is Selected Answer: d.S24,000. $90,000. b.845,000, $27,000. 4,824,000, 29) A sales discount does not Selected Answer: d. increase an operating expense account. a provide the purchaser with a cash saving, b. reduce the amount of cash received from a credit sale. «. increase a contra revenue account. 4. increase an operating expense account. 30) Income from operations will always result if Selected Answer: d. gross profit exceeds operating expenses. a the cost of goods sold exceeds operating expenses, b. revenues exceed cost of goods sol c, revenues exceed operating expenses, 4. gross profit exceeds operating expenses. 31) Which one of the follo statem Selected Answer: ¢. Gross profit a. Net sales: b. Net income is shown on a multiple-step but not on a. Gross profit 4. Cost of goods sold 32) Moses Company sells merchandise on account for $4,000 to Lane Company with eredit terms of 2/10, n/30. Lane Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Moses Company make upon receipt of the check? Selected Answer: c. Cash3,332SalesReturnsandAllowances600SalesDiseounts68AccountsRecelve 40,00 @ Cash 3,400Accounts Receivable 3,400 b. Cash3,332SalesReturs and All 668owances Accounts Receivable4,000 ©. Cash3,332SalesReturnsand600A llowancesSalesDiscounts68AccountsReceivable4,000 AP Cash3,920SalesDiscounts$0SalesReturnsandAllowances600Account3,400sReceivable 33) Cole Company has sales revenue of $13,000, cost of goods sold of $8,000 and operating expenses of $3,000 for the year ended December 31. Cole's gross profit is Selected Answer: b. $5,000, $10,000. b85,000, $2,000, 80, 34) In terms of liquidity, merchandise inventory is Selected Answer: c. more liquid than prepaid expenses. ‘amore liquid than cash, b. mote liquid than accounts receivable. ©. more liquid than prepaid expenses, 4. less liquid than store equipment. 35) The entry to record the receipt of payment wit terms of 2/10, 0/30 will include a credit to Selected Answer: c. Accounts Receivable for $750. 4, Sales Discounts forS15, . Cash for $735. ©. Accounts Receivable for $750. , Sales for $750, in the discount period on a sale of $750 with 36) A credit sale of $1,600 is made on April 25, terms 2/10, 1/30, on which a return of $100 is, granted on April 28, What amount is received as payment in full on May 4? Selected Answer: b. $1,568 $1,470 bS1,568 $1,600 $1,500 37) A company may use more than one inventory costing method concurrently. Selected Answer: True ‘True False 38) Inventory turnover is calculated as cost of goods sold divided by ending inventory. Selected Answer: False True False 39) Raw materials inventories are the goods that a manufacturer has completed and are ready to be sold to customers. Selected Answer: False True False40) The first-in, first-out (FIFO) inventory method results in an ending inventory valued at the most recent cost. True False 41) Which of the following statements is true regarding inventory cost flow assumptions? Selected Answer: a, A company may use more than one costing method concurrently. A company may use more than one costing method concurrently b. A company must comply with the method specified by industry standards. C.A company must use the same method for domestic and foreign operations. d. A company may never change its inventory costing method once it has chosen a method. 42) A problem with the specific identification method is that Selected Answer: b. management can manipulate income. a, inventories can be reported at actual costs ’, management can manipulate income. . matching is not achieved, 4d. the lower-of- cost market basis cannot be applied. 43) An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory, The effect of this error in the current period is Cost of Goods Sold Net Income Selected Answer: ¢.A\ a, Understated b, Overstated ©. Understated 4. Overstated 44) Holliday Company's inventory records show the following dat Units Unit Cost Inventory, January 15,000 $4.50Purchases:June184,500 4.00NovemberS 3,000 3.50 A physical inventory on December 31 shows 2,000 units on hand. Holliday sells the units for $6 ‘each. The company has an effective tax rate of 20%. Holliday uses the periodic inventory method. Ifthe company uses FIFO, what is the 45) gross profit for the period? Selected Answer: ¢. $10,500 $1,000 685,000 $10,500 819,000 46) Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2011 are as follows: Units Per unit price Total Balance,1/1/11300 $5.00 $1,500Purchase,1/15/111505.30 795Purchase,1/28/11 150 5.50 825 An end of the month (1/31/11) inventory showed that 180 units were on hand. If the company uses LIFO, what is the value of the ending inventory? Selected Answer: b. $900 $780 bs900 $984 ds! 47) Merchandise inventory is Selected Answer: c. reported as a current asset on the balance sheet. 2, reported under the classification of Property, Plant, and Equipment ofthe balance sheet.b. often reported as a miscellaneous expense on the income statement, reported as a current asset on the balance sheet. 4. generally valued at the price for which the goods can be sold, 48) An auto manufacturer would classify vehicles in va Selected Answer: d. work in process. a finished goods. », merchandising is inventory. C raw materials. d, work in process. us stages of production as 49) A new average cost is computed each time a purchase is made Selected Answer: b. moving-average cost method. ‘a average-cost method. bb moving-average cost method. c. weighted-average cost method. dal of these methods. the 450) Ina period of inflation, the cost flow method that results in the lowest income taxes is the Selected Answer: b, LIFO method, 1. FIFO method. ». LIFO method, c. average-cost method D .gross profit method.